Introducing a central bank digital currency (CBDC) will have significant implications for the operations and risks faced by the issuing central bank. These implications are dependent on the specific design chosen and various internal and external factors. This report focuses on analyzing the operating, technology, third-party, and business continuity risks that the issuing central bank may encounter. It serves as a valuable complement to other research on CBDCs, which often concentrates on their impact on financial stability, monetary policy, and the broader economy.

The report proposes an integrated risk-management framework that can be applied throughout the entire life cycle of a CBDC, from research and design to implementation and operation. It discusses the consequences of different design choices that central banks must make and suggests tools and processes to identify and mitigate the risks associated with a CBDC. In order for CBDCs to be a reliable payment method, central banks must also address risks such as interruptions, disruptions, and ensuring integrity and confidentiality. A key risk is the potential gaps in central banks’ internal capabilities and skills. While some CBDC-related activities can be outsourced, this requires the capacity to select and supervise vendors effectively.

This report is the result of collaborative work conducted by BIS member central banks in the Americas, under the Consultative Group on Risk Management (CGRM). The CGRM brings together representatives from the central banks of Brazil, Canada, Chile, Colombia, Mexico, Peru, and the United States. The task force responsible for this report was led by Diego Ballivián from the Central Bank of Chile, with subgroups led by Antonieta Campa from the Bank of Mexico, María Jesús Orellana from the Central Bank of Chile, and David Whyte from the BIS. The BIS Americas Office acted as the secretariat.

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Project Tourbillon, developed by the Bank for International Settlements (BIS) Innovation Hub Swiss Centre, aims to explore privacy, security, and scalability for retail central bank digital currencies (CBDCs). The project introduces a new privacy paradigm that enables payer anonymity, providing cash-like anonymity to the payer. Privacy is a crucial requirement for retail CBDCs, as indicated by recent surveys conducted by the Bank of England and the European Central Bank. The project tested the concept of payer anonymity, where consumers can make payments using CBDCs without disclosing personal information to anyone, including the merchant, banks, and the central bank. However, the identity of the merchant is disclosed to the merchant’s bank. This concept helps to reduce tax evasion and illicit payments. Privacy is a challenging requirement to solve, as it necessitates technological protection without the risk of abuse. Security and scalability are also important factors in handling payments for retail CBDCs. The project developed two prototypes based on the eCash design, focusing on cash-like digital payment instruments and enhanced security features. The report discusses the experimental work and provides insights for central banks. Quantum-safe cryptography was implemented successfully but requires further research for speed enhancements. Project Tourbillon is an initial step in exploring privacy, security, and scalability in retail CBDC design, with the need for additional work to improve quantum-safe cryptography and explore viability.

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The Project Tourbillon, which took place on 28 Nov 2023, focused on exploring anonymity in digital payments. It aimed to address the concerns regarding privacy, security, and scalability for retail central bank digital currencies (CBDCs). The decline in cash usage globally and the increasing popularity of digital payments have led to a growing number of cashless transactions, with over 1 trillion transactions in CPMI countries alone. However, this development has also raised concerns about the potential erosion of privacy. Public consultations by central banks on retail CBDCs have highlighted privacy as a crucial user requirement. In response to these concerns, Project Tourbillon developed two CBDC prototypes that simultaneously addressed three features: enabling payer anonymity to ensure privacy, implementing quantum-safe cryptography for enhanced security, and testing the prototypes’ scalability to handle a growing number of transactions using payment data. The Project Tourbillon initiative was led by the BIS Innovation Hub Swiss Centre.

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